Byrna Technologies Inc.: Form 10-Q for the period ended Feb 28, 2026

References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Byrna Technologies Inc. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” "may," “estimate,” "opportunity," "could," “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important risk factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the year ended November 30, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 5, 2026, as amended on March 30, 2026 (the “2025 10-K”), and the Company’s subsequent filings with the SEC, all of which can be accessed on the EDGAR section of the SEC’s website at www.sec.gov (http://www.sec.gov). Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, including but not limited to our ability to design, introduce and sell new products, services and features, the impact of any regulatory proceedings or litigation, our ability to protect our intellectual property and compete with existing and new products, the impact of stock compensation expense, dividends, warrant exercises and related accounting, impairment expense and income tax expense on our financial results, our ability to manage our supply chain and avoid production delays, shortages or other factors, including product mix, cost of parts and materials and cost of labor that may impact our gross margins, our ability to retain and incentivize key management personnel, product defects, the success of our entry to new markets, customer purchase behavior and negative media publicity or public perception of our brand or products, restrictions or prohibitions imposed by advertising platforms, loss of customer data, breach of security or an extended outage related to our e-commerce storefronts, including a breach or outage by our third party cloud based storage providers, exposure to international operational risks, delayed cash collections or credit losses, determinations or audits by taxing authorities, changes in government regulations, the impact of existing or future regulation by the Bureau of Alcohol, Tobacco, and Firearms, import and export regulators, or other federal or state authority, or changes in international law in key jurisdictions including South America and South Africa or our inability to obtain needed exemptions from such existing or future regulation.

OVERVIEW

The following discussion and analysis is intended to help you understand us, our operations and our financial performance. It should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes, which are included in Item 1 of this report.

Byrna Technologies Inc. designs, manufactures, retails and distributes less lethal personal security solutions intended for situations that do not require the use of lethal force. Our mission is to empower individuals to protect themselves and others, and our product strategy emphasizes ease of use, effectiveness, and reliability in both consumer and professional safety environments. We also develop tools intended to serve as alternatives to traditional firearms for law enforcement and private security customers with the goal of reducing firearm related incidents and supporting de-escalation practices. Our strategy includes positioning Byrna® as a consumer lifestyle brand associated with personal confidence and safety, while expanding our product portfolio to broaden market reach and drive sales growth from both new and existing customers.

Our business strategy is twofold: (1) to fulfill the growing demand for less-lethal products in the law enforcement, correctional services, and private security markets and (2) to provide civilians – including those whose work or daily activities may put them at risk of being a victim – with easy access to an effective, less-lethal way to protect themselves and their loved ones from threats to their person or property.

We believe demand for less lethal products in the United States and internationally continues to rise and that this category will remain a growing segment of the broader security market. We plan to meet this demand by manufacturing and distributing our Byrna® SD, Byrna LE and most recently our Byrna CL launchers, along with continued expansion of our accessory and ammunition offerings.

On July 31, 2024, our Board of Directors approved a plan to buy back up to $10 million worth of shares of our common stock (the “Stock Buyback Program”). The Stock Buyback Program is intended to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. The Stock Buyback Program will expire on the sooner of the two-year anniversary of its initiation or until we reach the aggregate limit of $10 million for the repurchases under the program.

Beginning in fiscal year 2025, we also reorganized our operations into two reportable sales channels, Direct‑to‑Consumer (“DTC”) and Wholesale (dealer/distributor), to align with our expanded omnichannel strategy, the opening of Company‑operated retail stores, and increased penetration into national retail chains and international distributors.

The Company operates primarily in the United States and Canada through wholly owned subsidiaries.

RESULTS OF OPERATIONS

Three months ended February 28, 2026 as compared to three months ended February 28, 2025:

Net Revenue

The Company presents revenue net of returns, allowances, and discounts. Net revenues were $29.0 million in the first fiscal quarter of 2026 which represents an increase of $2.8 million, or 10.7%, as compared to the prior year period revenues of $26.2 million. The increase was primarily driven by higher wholesale dealer and distributor sales, which increased by $4.4 million. Direct to customer sales, via Amazon and our website, decreased by $1.8 million, or 8.9%, from $19.9 million in the first fiscal quarter of 2025 to $18.1 million in the same fiscal quarter of 2026. Sales to domestic dealers and retailers improved in the three months ended February 28, 2026, increasing by 114.9% to $10.1 million from $4.7 million in the three months ended February 28, 2025. Sales to international markets, including Canada, decreased from $2.0 million in the three months ended February 28, 2025 to $1.3 million in the three months ended February 28, 2026, which includes $0.2 million in royalty revenue related to the LATAM Licensing Agreement during the first fiscal quarter of 2026.

Segment Results

Direct‑to‑Consumer (DTC)

DTC revenue decreased to $18.1 million in the first fiscal quarter of 2026 compared to $19.9 million in the prior year period, primarily driven by a decline in direct‑to‑customer sales through the Company’s online channels, including Amazon and the Company’s website.

Wholesale (Dealer/Distributor)

Wholesale revenue increased to $10.7 million in the first fiscal quarter of 2026 compared to $6.3 million in the prior year period, reflecting (i) expanded relationships with national and regional retailers, (ii) enhanced engagement with distributors, and (iii) increased law‑enforcement interest.

Cost of Goods Sold

Cost of goods sold was $11.6 million in the first fiscal quarter of 2026 compared to $10.3 million in the prior year period. This increase of $1.3 million, or 12.6%, is primarily due to the increase in sales volumes. Cost of goods sold attributable to Direct‑to‑Consumer (“DTC”) was $6.3 million in the first fiscal quarter of 2026, compared to $7.0 million in the prior year period. Cost of goods sold attributable to Wholesale was $5.3 million in the first fiscal quarter of 2026, compared to $3.3 million in the prior year period.

Gross Profit

Gross profit is calculated as total revenue less cost of goods sold, and gross margin is calculated as gross profit divided by total revenue. Cost of goods sold includes costs associated with the production and procurement of products, including labor and overhead, inbound freight, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $17.4 million during the first fiscal quarter of 2026, or 59.9% of net revenue, compared to gross profit of approximately $15.9 million, or 60.8% of net revenue, in the prior‑year period. The decrease in gross margin was primarily driven by a shift in sales mix toward Wholesale and Retail channels, which generally carry lower average selling prices than Direct‑to‑Consumer (“DTC”) sales, as well as higher manufacturing costs recognized in cost of goods sold during the period related to production variances.

Operating Expenses

Operating expenses were $16.5 million in the first fiscal quarter of 2026, an increase of $2.3 million, as compared to the prior year period expenses of $14.2 million. The increase is due to an increase of $1.3 million in marketing expenses, as the company incurred additional marketing costs to support business growth, an increase of $0.2 million in variable expenses, which increased in proportion to sales volume, an increase of $0.7 million in professional fees, largely attributable to higher accounting, audit, legal, and recruitment‑related costs, a $0.3 million increase in employee compensation costs, and an increase in credit losses of $0.4 million related to a higher allowance for certain customer receivables recorded during the quarter.

Other Income (Expense)

We recorded $0.2 million and $0.1 million of foreign currency transaction loss during the three months ended February 28, 2026 and 2025, respectively. We recorded $0.1 million of interest income during the three months ended February 28, 2026 compared to $0.2 million in the three months ended February 28, 2025.

Income Tax Provision

For the three months ended February 28, 2026 and February 28, 2025, we recorded less than $0.1 million of income tax benefit and $0.1 million of income tax expense, respectively. For the three months ended February 28, 2026 and February 28, 2025, the effective tax rate was (0.4)% and 6.4%, respectively. The effective tax rate for the three months ended February 28, 2026 reflects discrete excess tax benefits related to the vesting of stock‑based compensation awards, which more than offset tax expense on pre‑tax income. Our tax rate differs from the statutory rate of 21.0% due to the effects of state taxes net of federal benefit, the foreign tax rate differential as a result of Byrna South Africa, permanent non-deductible expenses, and discrete items related to stock‑based compensation.

Net Income

Net income was $0.8 million for the three months ended February 28, 2026, a decrease of $0.9 million compared to $1.7 million for the three months ended February 28, 2025.

Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), we provide an additional financial metric that is not prepared in accordance with GAAP (non-GAAP) with presenting non-GAAP adjusted EBITDA. Management uses this non-GAAP financial measure, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate our financial performance. We believe that this non-GAAP financial measure helps us to identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we exclude in the calculations of the non-GAAP financial measure.

Accordingly, we believe that this non-GAAP financial measure reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business and provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

This non-GAAP financial measure does not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP. There are limitations in the use of non-GAAP measures, because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment concerning exclusions of items from the comparable non-GAAP financial measure. In addition, other companies may use other non-GAAP measures to evaluate their performance, or may calculate non-GAAP measures differently, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison.

Adjusted EBITDA

Adjusted EBITDA is defined as net income as reported in our Condensed Consolidated Statements of Operations and Comprehensive Income excluding the impact of (i) depreciation and amortization; (ii) income tax provision (benefit); (iii) interest income (expense); (iv) stock-based compensation expense, (v) impairment loss and (vi) one-time, non-recurring other expenses or income. Our Adjusted EBITDA measure eliminates potential differences in performance caused by variations in capital structures (affecting finance costs), tax positions, the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). We also exclude certain one-time and non-cash costs. Reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, is as follows (in thousands):

24

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Summary

Cash and cash equivalents as of February 28, 2026 totaled $7.5 million, a decrease of $6.2 million from $13.7 million of cash and cash equivalents as of November 30, 2025.

Operating Activities

Cash used in operating activities was $4.4 million for the three months ended February 28, 2026 compared to cash used in operations of $3.8 million during the prior year period. Net income was $0.8 million compared to $1.7 million for the three months ended February 28, 2026 and February 28, 2025, respectively. Significant changes in noncash and working capital activity are as follows:

Non-cash activity includes stock-based compensation expense of $0.5 million for the three months ended February 28, 2026, compared to $0.8 million for the three months ended February 28, 2025; and depreciation and amortization expense of $0.6 million for the three months ended February 28, 2026, compared to $0.4 million for the three months ended February 28, 2025; In addition to the non-cash activities mentioned above, the Company recognized a deferred tax asset of less than $0.1 million for the three months ended February 28, 2026, compared to $0.4 million for the three months ended February 28, 2025.

Inventory increased during the three months ended February 28, 2026 by $0.3 million compared to an increase of $3.2 million for the three months ended February 28, 2025. Accounts receivable increased by $0.9 million during the three months ended February 28, 2026 as compared to an increase of $0.3 million for the three months ended February 28, 2025. Accounts payable and accrued liabilities decreased during the three months ended February 28, 2026 by $5.1 million compared to a decrease of $1.9 million for the three months ended February 28, 2025. Prepaid expenses and other current assets increased by $0.4 million during the three months ended February 28, 2026 compared to an increase of $0.5 million during the three months ended February 28, 2025. Operating lease liabilities decreased by $0.2 million during the three months ended February 28, 2026 compared to a decrease of $0.1 million during the three months ended February 28, 2025. Deferred revenues decreased $0.1 million during the three months ended February 28, 2026 compared to a decrease of $1.3 million for the three months ended February 28, 2025.

Investing Activities

Cash flows used in investing activities was $0.6 million for the three months ended February 28, 2026 compared to $5.3 million cash used for the three months ended February 28, 2025. The prior year period investing activities primarily relates to the purchases of property and equipment and marketable securities while the current period relates to purchases of property and equipment. Property and equipment increased during the three months ended February 28, 2026 by $0.6 million compared to purchases of $2.6 million for the three months ended February 28, 2025. During the three months ended February 28, 2025, the Company purchased $2.7 million of marketable debt securities. There were no purchases of marketable debt securities during the three months ended February 28, 2026.

Financing Activities

Cash flows used in financing activities was $1.0 million for the three months ended February 28, 2026, compared to cash provided by financing activities of $0.1 million for the three months ended February 28, 2025. The current year amount was primarily composed of taxes paid on issuances of restricted stock units of less than $0.1 million and payments of $1.0 million for repurchases of common stock. The prior year amount was primarily composed of proceeds from stock option exercises and taxes paid on issuances of restricted stock units.

We require significant capital to meet our obligations as they become due. Throughout the next twelve months, we expect to fund our operations primarily from cash generated from operations. The Company also has access to an existing credit facility, as discussed in Note 24, Credit Facility, which may be used, but is not currently anticipated to be drawn, to provide additional liquidity if needed. We may pursue additional equity offerings or debt financings to provide working capital and satisfy debt obligations. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If we are required to raise additional capital to support our operations and are unable to secure additional funding, we may be forced to curtail or suspend our business plans.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 5, “Recent Accounting Guidance,” in the Notes to unaudited condensed consolidated financial statements included in Item 1 of this report for a discussion of recently issued and adopted accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our unaudited condensed consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 4, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of the 2025 10-K. During the three months ended February 28, 2026, there were no significant changes to our critical accounting policies from those described in our 2025 10-K.

Evaluation of Disclosure Controls and Procedures

Our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of February 28, 2026 pursuant to Rule 13a-15(b) of the Exchange Act. Disclosure controls and procedures are designed to ensure that material information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that material information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our CEO and CFO concluded with reasonable assurance, that as of February 28, 2026, our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the first quarter of 2026 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Factors that could cause our actual results to differ materially from those in this report include the “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended November 30, 2025, filed with the SEC on February 5, 2026, as amended on March 30, 2026. There have been no material changes to the risk factors disclosed in our 2025 Form 10-K.